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Corporate Welfare Spending vs. the Entrepreneurial Economy

Mr. Chairman and members of the committee, thank you for the
invitation to testify regarding corporate welfare, entrepreneurs,
and economic growth. This testimony will address the problems
caused by corporate welfare and discuss why spurring
entrepreneurship is a better approach for generating economic
growth.

Rising spending and huge deficits are pushing the nation toward
an economic crisis. There is general agreement that policymakers
need to find wasteful and damaging programs in the federal budget
to terminate. One good place to find savings is spending on
corporate welfare.

Some people claim that business subsidies are needed to help fix
market failures in the economy. But corporate welfare is just as
likely to create failures by misallocating resources and inducing
businesses to spend time on lobbying rather than on making better
products. Corporate welfare transfers wealth from average families
to favored businesses, and it creates corrupting ties between
government officials, politicians, and business leaders.

Policymakers are rightly concerned about the competitiveness of
American businesses in the global economy. But the way to address
that concern is not through subsidies, but through broad-based
reforms such as permanent reductions to capital gains and corporate
income tax rates.

The Taxpayer Cost of Corporate Welfare

A forthcoming Cato Institute study finds that federal business
subsidies total almost $100 billion annually.1 That is a
fairly broad measure of subsidies to small businesses, large
corporations, and industry organizations. The subsidies are handed
out from programs in many federal departments including
Agriculture, Commerce, Energy, and Housing and Urban
Development.

However, there is no precise measure of “corporate welfare.” As
part of the national income accounts, the Bureau of Economic
Analysis calculates that the federal government handed out $57
billion in business subsidies in 2010.2 A 1995
Congressional Budget Office Study put the total at $30 billion in
spending subsidies for businesses at that time.3

Ending business subsidies would be one step toward reducing the
federal deficit, but there would be other benefits as well. The
following sections discuss the unfairness of corporate welfare, how
it harms the economy and generates corruption, and why
entrepreneur-led growth is a better alternative.

Corporate Welfare Is Unfair

The Constitution empowers the federal government to take steps
to ensure an open national economy. The Commerce Clause gives the
government the authority to “regulate Commerce… among the several
States,” but the purpose was to remove barriers to trade, not to
actively favor some businesses over other businesses and
individuals.

People disagree on the meaning of “fairness,” but surely it
includes supporting the bedrock American value of equality under
the law. The government’s proper role should be that of a neutral
referee in the economy facilitating the free exchange of goods and
services. Yet corporate welfare advantages certain businesses at
the expense of taxpayers, families, and other businesses, as some
examples illustrate:

Farm Subsidies. Farm subsidies
redistribute wealth from taxpayers to often well-off farm
businesses and landowners. “Farm income stabilization” payments
have recently fluctuated between about $13 billion and $33 billion
annually. 4 This is a welfare hand-out like food stamps,
yet it goes to higher-income households. In 2010, the average
income of farm households was $84,400, or 25 percent above the
$67,530 average of all U.S. households.5 Moreover, the
great bulk of farm subsidies go to the largest
farms.6

Sugar Subsidies. The federal
government also enriches certain businesses in an off-budget
manner, as sugar subsidies illustrate. The government runs a
Soviet-style system of price supports, quotas, and import barriers
for sugar. The effect is to push up the domestic price of sugar to
the benefit of U.S. sugar producers while imposing extra costs on
consumers.7 Artificially high sugar prices also hurt
American businesses that use sugar, and numerous U.S. food
companies have moved production to Canada and Mexico where sugar
prices are lower.8

Economic Development. The government
runs many so-called economic development programs that distribute
corporate welfare. As one small example, the Community Development
Block Grant program recently handed out $220,000 to a craft brewery
in Michigan.9 Meanwhile the Value Added Marketing
program hands out money to selected wineries across the
country.10 These hand-outs are not fair to taxpayers or
the breweries, wineries, and other businesses that don’t receive
such special favors.

Polls show that the public understands the unfairness of
corporate welfare, and most people want it cut. Most people are
against the federal government providing loan guarantees to small
businesses; only 29 percent think that the government should help
large corporations finance their export sales; and a plurality (46
percent) think farm subsidies should be abolished.11
Polls have also found strong opposition to federal bailouts of
financial institutions.12

Corporate Welfare Distorts the Economy

Some policymakers think that subsidies are needed to help U.S.
businesses compete in the world economy. But the more we subsidize
businesses, the more we weaken the market’s profit-and-loss
signals, and the more we undermine America’s traditions of
entrepreneurship and gutsy risk-taking by the private sector.

People argue that business subsidies are needed to fix market
imperfections. But subsidies usually don’t work as intended, and
they often distort markets rather than fixing them. Robert Novak
once said that “the mind-set underlying corporate welfare is that
of the central planner,” and yet we know that central planning does
not work.13

Consider the energy industry, which Republicans and Democrats
have been manipulating with subsidies for decades. An early subsidy
effort was the Clinch River Breeder Reactor, which was an
experimental nuclear fission power plant in Oak Ridge, Tennessee in
the 1970s. This Republican-backed boondoggle cost taxpayers $1.7
billion and produced absolutely nothing in return.14

Then we had the Synthetic Fuels Corporation (SFC) approved by
President Jimmy Carter in 1980, who called it a “keystone” of U.S.
energy policy. The government sank $2 billion of taxpayer money
into this scheme that funded coal gasification and other
technologies before it was closed down as a failure. The SFC
suffered from appalling mismanagement, huge cost overruns on its
projects, political cronyism, and pork barrel politics in dishing
out funding.15

Both parties have backed dubious “clean coal” projects for
decades. The GAO found that many of these projects have
“experienced delays, cost overruns, bankruptcies, and performance
problems.”16 In a review of federal fossil fuel
research, the Congressional Budget Office concluded: “Federal
programs have had a long history of funding fossil-fuel
technologies that, although interesting technically, had little
chance of commercial implementation. As a result, much of the
federal spending has not been productive.”17

With the poor record of energy subsidies over the decades, it is
no surprise that the Obama administration is having trouble with
its green energy activities. The administration’s failures keep
piling up—Solyndra, Raser Technologies, Ecotality, Nevada
Geothermal, Beacon Power, First Solar, Abound Solar, and Beacon
Power.18 These subsidy recipients have either gone
bankrupt or appear to be headed in that direction.

Why don’t business subsidies work very well? One reason is that
political pressures undermine sound economic choices. The
Washington Post found that “Obama’s green-technology
program was infused with politics at every level.”19 The
decision to approve the Solyndra loan, for example, appears to have
been rushed along by high-level politics.

Perhaps more importantly, subsidies change the behavior of
businesses. An economist recently quipped to me: “I don’t know
whether the government is better at picking winners rather than
losers, but I do know that losers are good at picking governments.”
When the government starts handing out money, businesses with weak
ideas get in line because the businesses with the good ideas can
get private funding. Enron, for example, was able to grab huge
federal support for its disastrous foreign investment schemes.

At recent House hearings on green energy subsidies, most
witnesses lined up in favor of Department of Energy loan programs,
except for one witness who heads a solar power firm that does not
receive federal subsidies.20 James Nelson of Solar3D
said that subsidizing green energy commercialization “is a wasteful
mistake because it doesn’t work.”21 Here are some of the
problems he pointed to:

Firms that receive subsidies become spendthrift.
Nelson contrasted his firm’s lean operations with Solyndra’s
wasteful ways, which included building a fancy factory in a
high-cost location. Nelson noted that the “most powerful driver in
our industry is the relentless reduction in cost.” Yet government
intervention rarely works to drive down costs in any activity.

Subsidies aren’t driven by actual market demands.
Nelson noted that U.S. adoption of solar energy lags behind several
other nations. But he said, “this should not bother us if it means
that the other countries are investing in technology that is not
economically viable.” In other words, if other countries are
misallocating resources, that won’t hurt us. The good news, he
said, is that America is the leader in market-driven private
venture capital for “clean tech.”

Subsidies distort business decisions. Nelson noted
that “giving companies money to set up manufacturing in the U.S.
may doom them to failure by financing them into a strategically
uncompetitive position.” In other words, if subsidies induce U.S.
firms to put more production in the United States than is
efficient, it will disadvantage them in the marketplace.

Venture capitalists have already funded the best projects,
leaving the dogs for the government. If venture capitalists
“reject a project, it is difficult to believe that the government
could do a better job of picking a winner,” argues Nelson.

The House hearing included testimony from green energy firms
that had received subsidies. Their comments revealed how subsidies
were eroding their focus on the bottom line. The firms stressed how
many jobs they were creating and how their supplier chains covered
many states—and thus many congressional districts. One solar
firm bragged that it is “creating and maintaining jobs locally and
across the nation,” while it is “procur(ing) from a supply chain
that stretches across 17 states.”22 Another solar firm
bragged that it “spent more than $1 billion with U.S. suppliers in
35 states.”23

Subsidy supporters at the hearing stressed the “nonfinancial
objectives” of green subsidies, such as jobs.24 But as
Nelson noted, “businesses are not made more successful by more
jobs.”25 If businesses want to succeed in tough global
competition, they need to minimize their labor and supplier costs,
and subsidies erode that lean focus. Nelson concluded that success
in the marketplace “requires brains, discipline, and grit. It is
rarely aided, and often impeded by government
involvement.”26

Another problem with business subsidies is that they can
encourage investing in very dubious projects. That is the story of
Enron’s international investments, which played an important role
in the implosion of the firm. By one estimate, Enron received $2.4
billion in federal aid through the Export-Import Bank and the
Overseas Private Investment Company between 1992 and
2000.27 Another study puts total federal government
subsidies to Enron for its foreign schemes at $3.7 billion, plus
Enron received subsidies from international agencies such as the
World Bank.28 All these subsidies made possible Enron’s
excessively risky foreign investments, which came crashing down at
the same time that the firm’s accounting frauds were being
revealed.29

Suppose that the government was capable of channeling subsidies
only to well-managed companies with sensible ideas. Then the
subsidies wouldn’t be needed because they would simply crowd out
private investment. That seems to be the case with much of the $7
billion in subsidies for rural broadband in the 2009 stimulus bill,
as one detailed study in 2011 found.30

Or consider the Department of Energy’s Advanced Technology
Vehicles Manufacturing Loan Program, which provides subsidies to
companies to develop green cars. A former executive with Tesla
Motors, which received subsidies, concluded that “private
fundraising is complicated by investor expectations of government
support.”31 Subsidies distort the venture capital
market, having “a stifling effect on innovation, as private capital
chases fewer deals and companies that do not have government
backing have a harder time attracting private
capital.”32

A final problem with corporate welfare is that it can create
broader distortions in the economy. For more than a century, the
federal Bureau of Reclamation has subsidized irrigation in the 17
western states. About four-fifths of the water supplied by the
bureau goes to farm businesses, and this water is greatly
underpriced.33 Because farmers are receiving water at a
fraction of the market price, they are over consuming it, which
threatens to create water shortages in many areas in the West.
Subsidized irrigation also causes environmental damage.

Corporate Welfare Generates Corruption

The creation of corporate welfare programs has spawned an
expanding web of lobby groups that demand ever more favors from
policymakers. The more that the government intervenes in the
economy, the more lobbying activity is generated, and the more new
subsidy programs get created. It’s a vicious cycle.

Corporate welfare doesn’t just create direct economic harm, it
also erodes support for America’s free enterprise system.
Businesses that become hooked on subsidies become tools of the
state. They lose their independence, and they may focus more on
gaining special benefits from Washington than on making good
products. The more special breaks that businesses receive, the less
willing they are to speak out against the expansion of big
government.

While some people think that corporations lobby to slash
government, they mainly do the opposite. Businesses often lobby in
favor of federal intervention if it will benefit them and hurt
their competitors. The major airlines, for example, were against
airline deregulation in the 1970s because existing rules protected
them from competition.34

Business subsidy programs attract corruption like garbage dumps
attracts rats, and that has always been the case in Washington. For
example, federal subsidies for the first transcontinental railroad,
the Union Pacific, led to the Credit Mobilier scandal of the 1870s,
which involved payoffs to dozens of members of Congress. In recent
decades, scandals stemming from corporate welfare have been a
bipartisan problem, as these examples illustrate:

HUD Subsidies under Reagan. President
Ronald Reagan’s Department of Housing and Urban Development
overflowed with corruption in the 1980s under Secretary Sam
Pierce.35 Pierce routinely dished out grants, loans, and
other sorts of subsidies to friends and business associates. And
HUD created programs that involved large subsidies to mortgage
lenders, developers, and other businesses, with Republican Party
contributors as frequent beneficiaries.

Commerce Subsidies under Clinton.
President Bill Clinton’s Commerce Secretary, Ron Brown, used
federal business subsidies as a fund-raising tool for the
Democratic Party in the 1990s. Corporate executives who played the
game were given access to export promotion trips and loans from
OPIC.36 In subsequent investigations, U.S. District
Judge Royce Lamberth found that Commerce officials concealed and
destroyed documents relating to the scandal, and he compared the
officials to “con artists” and “scofflaws.37

Enron Subsidies under Clinton and
Bush. Enron Corporation is a poster child for the
harm of business subsidies, particularly with regard to its
disastrous foreign investments. Enron lobbied government officials
to expand export subsidy programs, and it received billions of
dollars in aid for its foreign projects from the Ex-Im Bank, OPIC,
the U.S. Trade and Development Agency, the U.S. Maritime
Administration, the Commerce Department, and the U.S.-backed World
Bank. As noted, Enron received about $3.7 billion in financing
through federal government agencies.38 These subsidies
induced Enron to make exceptionally risky foreign investments, and
the resulting losses were an important factor in the company’s
implosion.39

During the Clinton and early Bush administrations, high-level
officials went to great lengths to aid Enron on an Indian power
plant deal.40 The Washington Post noted,
“President Bush’s National Security Council led a ‘working group’
with officials from various Cabinet agencies to resolve Enron’s
troubles over a power plant venture.”41 We saw similar
high-level involvement in the failed Solyndra investment by the
Obama administration. Top government officials should be spending
their time on policies in the general interest of all Americans,
not on helping individual companies earn higher profits.

Green Subsidies under Obama. The
Washington Post found, “Obama’s green-technology program
was infused with politics at every level.”42 The $535
million loan guarantee for Solyndra, is a prime example. The DOE
approved the loan after receiving pressure from White House
officials to move ahead so that the vice president could announce
it at a groundbreaking for the company’s factory.43
President Obama visited Solyndra and called the firm an “engine of
economic growth,” but later it collapsed.44

President Obama’s green energy programs illustrate how corporate
welfare creates corrupting relationships between businesses and
politicians. The Washington Post found that “$3.9 billion
in federal [energy] grants and financing flowed to 21 companies
backed by firms with connections to five Obama administration
staffers and advisers.”45 It also noted that the “main
players in the Solyndra saga were interconnected in many ways, as
investors enjoyed access to the White House and the Energy
Department.”46 According to the New York Times,
Solyndra “spent nearly $1.8 million on Washington lobbyists,
employing six firms with ties to members of Congress and officials
of the Obama White House.”47

American businesses, of course, have a right to lobby the
federal government. But given that reality, Congress throws fuel
onto the corruption fire by creating business subsidy programs.
When subsidy money flows out the door from Washington to businesses
at the same time that money flows back from businesses to
Washington for lobbying, it’s no surprise that we get
influence-peddling. Corporate welfare undermines honest and
transparent governance, and Americans are sick and tired of the
inevitable scandals.

Long-Term Growth Depends on Entrepreneurs

Most of America’s technological and industrial advances have
come from innovative private businesses in competitive markets.
Indeed, it is probably true that most of our long-term economic
growth has come not from existing large corporations or
governments, but from entrepreneurs creating new businesses and
pioneering new industries. Such entrepreneurs have often had to
overcome barriers put in place by dominant businesses and
governments.

Economic historians Nathan Rosenberg and L.E. Birdzell found
that “new enterprises, specializing in new technologies, were
instrumental in the introduction of electricity, the
internal-combustion engine, automobiles, aircraft, electronics,
aluminum, petroleum, plastic materials, and many other
advances.”48 We can update that list to include cell
phones, personal computers, biotechnology, and all kinds of
Internet businesses.

If policymakers want to get U.S. economic growth back on track,
they should put entrepreneurs front-and-center in their thinking
about policy. Here are some of the ways that entrepreneurs generate
growth:

Entrepreneurs are Radical Innovators.
Their advances are usually unexpected and disruptive to existing
businesses.49 Personal computers were pioneered in the
1970s by new companies such as Apple. The opportunity was missed
both by leading computer firms and by government planning agencies
such as Japan’s MITI.50 Big corporations were focused on
mini and mainframe computers, while the U.S. government was
subsidizing supercomputers. Governments and big companies often
overlook niche products that later become revolutionary. In the
1970s, microcomputers were an obscure hobbyist activity, and
software for microcomputers—which Bill Gates helped
pioneer—was a niche within a niche. The small-scale
innovations of entrepreneurs in niches often create huge,
unforeseen changes.

Entrepreneurs Generate Competition.
Another crucial role of entrepreneurs is that they challenge
dominant firms and governments. One great story is the rise of MCI
Corporation in the 1970s and 1980s. MCI helped destroy the AT&T
monopoly, which paved the way for the modern telecommunications
revolution. Another innovator was Fred Smith of Federal Express.
Today we take overnight letter delivery for granted, but it was
Smith who battled federal regulatory roadblocks in the 1970s and
provided new competition for the U.S. Postal Service by proving
that there was an untapped demand for rapid delivery.

Entrepreneurs Turn Inventions into
Innovations. America’s long-run growth is often
portrayed as a steady process of accumulating new
inventions. Many people seem to think that the government
can simply pump money into research and the economy will grow. But
that “science push” theory of growth is incorrect. Economies grow
because of innovations, which are inventions that are
packaged and tested in the marketplace by entrepreneurs.

The modern economy is steeped in uncertainty. No one can predict
the future, not even the best scientists, engineers, and economists
in big companies and the government. Many experts have made hugely
off-base prognostications about the economy.51 Two
decades ago, many pundits and policymakers were convinced that
Japan was taking over the global economy. Professor and pundit
Robert Reich thought that “chronic entrepreneurialism” was
undermining the U.S. economy. And past predictions about the
computer industry have been laughable, such as this comment in 1977
by the founder of Digital Equipment Corporation: “There is no
reason for any individual to have a computer in his home.”

Luckily, expert predictions don’t drive the economy. Rather,
successful market economies work by having swarms of entrepreneurs
freely testing new ideas. Entrepreneurs are the economy’s guinea
pigs. They have the guts to act in the face of uncertainty, and
they learn from their mistakes and keep trying until they find
ideas that work and generate profits.

By contrast, government plans to stimulate the economy are often
based on ideologies and rigid ideas. Some policymakers believe that
particular energy technologies are THE solution to America’s
problems, and they support ongoing subsidies year after year
regardless of marketplace realities. By contrast, in competitive
and unsubsidized markets, mistakes are usually quickly exposed and
businesses cut their losses short and change direction.

It appears that the unexpected fall in solar panel prices helped
to sink Solyndra. Perhaps businesses that are tethered to
governments are slower to make the changes needed to survive. The
government tends to work at a turtle’s pace, which doesn’t sync
well with the fast-paced modern economy. We saw a comparison of the
government turtle with the private-sector gazelle during the first
sequencing of the human genome in the late 1990s. The government’s
lavishly funded Human Genome Project was a lengthy multi-year
research project, but it was upstaged when entrepreneur Craig
Venter launched Celera Genomics to complete the job at a fraction
of the time and cost.

What are the policy lessons from America’s great entrepreneurial
history? One lesson is that because markets have high levels of
uncertainty, government agencies and dominant companies cannot be
relied upon to secure our economic future. Instead, we should
remove hurdles to entrepreneurship every way we can—by tax
reforms, by repealing barriers to entry into industries, and by
reducing financial industry barriers to private risk financing.

While it has become fashionable to criticize Wall Street, the
financial industry has been crucial to funding waves of innovation
in the U.S. economy. Risk capital was integral to the railroad and
telegraph booms of the 1800s, and the radio, electricity, and
automobile booms of the early 20th century. J.P. Morgan Chase has
garnered negative headlines in recent weeks, but J.P. Morgan was
the company that provided seed capital for Thomas Edison’s Edison
Electric Illuminating Company, which became General
Electric.52

In recent decades, high-yield bonds, venture capital, and angel
investment have played key roles in growing new industries. Today,
U.S. venture capital and angel investors pump more than $50 billion
annually into young companies.53 Tax policy influences
investment flows, and funding for high-growth ventures is affected
by the tax treatment of capital gains in particular. One step for
policymakers would be to create investment certainty by permanently
extending the 15 percent federal capital gains tax rate. Also, the
corporate tax rate should be cut to spur greater capital
investment—new capital equipment usually embodies
technological advances.

Policymakers should put aside the idea that some sort of big
intervention can permanently “win the race” for some particular
goal, such as energy independence, solar power dominance, or
beating China. In the recent House testimony, an energy consultant
said, “clean energy has been targeted by our major international
competitors (including China and Germany) as a critical, and
perhaps the critical, future growth and export industry… whether
the U.S. wins or loses in this race matters because the outcome
will have a large impact on future U.S. employment and economic
strength.”54 At the same hearing, a solar company
executive said that America could “win in the long run” with a
particular solar technology.55

However, those sorts of prognostications are refuted by U.S.
economic history. There is never any final “win” in the
marketplace. Look at how leadership in cell phones and smart phones
has shifted from firm to firm and country to country, from Nokia,
to RIM Blackberry, to Apple and others. Technologies and markets
are always changing, so the only way for America to permanently
“win” in the struggle for economic growth is to have the best
climate for investing, innovating, and building entrepreneurial
companies.

We’ve mainly focused on subsidies to new industries such as
green energy. But withdrawing corporate welfare from older,
established industries could spur innovation as well. Consider farm
subsidies. New Zealand ended virtually all its farm subsidies in
1984, which was a bold stroke because that country is much more
dependent on farming than is the United States. The changes were
initially resisted, but New Zealand farm productivity,
profitability, and output have soared since the
reforms.56 Faced with new financial realities, New
Zealand’s farmers innovated—they cut costs, diversified their
land use, sought nonfarm income, and developed new markets.

Thus rather than looking for new ways to subsidize businesses,
policymakers should be looking for places to withdraw subsidies and
deregulate in order to spur innovation. For example, just as the
break-up of the AT&T monopoly in the 1980s helped to generate
growth in the telecommunications industry, ending the U.S. Postal
Service monopoly today would spur innovation in that industry.
Europe is moving in that direction, with Germany and the
Netherlands already privatizing their postal
systems.57

The transportation sector is another area where innovation could
be spurred by the reduction of federal subsidies. For example,
Amtrak is doomed to inefficiency as a government-run business
pumped full of subsidies and shackled with regulations. It should
be privatized.58 Other countries are ahead of the United
States in privatizing transportation infrastructure, or at least in
bringing private investment into infrastructure.59

The United States subsidizes its air traffic control system, but
it doesn’t need to. Canada privatized its air traffic control
system in 1996, and it operates as a self-funded nonprofit
corporation. It has been a big success.60 Another ripe
area to cut subsidies and bring the private sector in is space
flight. The recent success of the SpaceX flight and the 2004
success of SpaceShipOne indicate that the private sector is
entirely capable of bold and risky technological ventures.

To sum up, the way to spur economic growth is not through
business subsidies, but through breaking down barriers to
entrepreneurs. Let’s give entrepreneurs a crack at postal services,
air traffic control, passenger trains, and other monopoly
industries. Let’s pursue tax and regulatory reforms to maximize the
flow of financing to new and growing businesses. And let’s stop
demonizing entrepreneurs who succeed and the financial system that
allows them to grow. If we want to exorcize some demons, we should
end the corporate welfare system that is corrupting our government
and the American economy.

Thank you for holding these important hearings.

Notes

1 Tad DeHaven, “Corporate Welfare in the Federal
Budget,” Cato Institute, forthcoming.2 Bureau of Economic Analysis, National Income and
Product Accounts, Table 3.13.3 Congressional Budget Office, “Federal Financial
Support of Business,” July 1995.4Budget of the United States Government, Fiscal
Year 2013, Historical Tables (Washington: Government Printing
Office, 2012), Table 3.2.5 Farm average income from
www.ers.usda.gov/Briefing/WellBeing/farmhouseincome.htm. U.S.
average income from Table A-2 in
www.census.gov/prod/2011pubs/p60-239.pdf.6 Environmental Working Group, 2011 Farm Subsidy
Database, http://farm.ewg.org.7 Chris Edwards, “The Sugar Racket,” Cato Institute,
June 2007.8
www.downsizinggovernment.org/agriculture/regulations-and-trade-barriers.9 David T. Young, “Bell’s Brewery Wins Federal Grant to
Help Pay for Expansion, Kalamazoo Gazette, April 5,
2011.10
www.downsizinggovernment.org/turning-taxpayer-money-wine.11 Rasmussen Reports, “58% Want to End Small Business
Administration Loan Guarantees,” August 16, 2011. And see Rasmussen
Reports, “Voters See These ‘Corporate Welfare’ Programs as a Good
Place to Cut Government Spending,” August 16, 2011.12 Pew Research Center, “Possible Negatives For
Candidates: Vote For Bank Bailout, Palin Support,” October 6,
2010.13 Quoted in Timothy P. Carney, The Big Ripoff
(New Jersey: John Wiley and Sons, 2006), p. x.14 www.downsizinggovernment.org/energy/subsidies.15 www.downsizinggovernment.org/energy/subsidies.16 Government Accountability Office, “Fossil Fuel
R&D: Lessons Learned in the Clean Coal Technology Program,”
GAO-01-854T, June 12, 2001, p. 2. 17 Congressional
Budget Office, “Budget Options,” March 2003, p. 60.18 Marc A. Thiessen, “Obama’s Equity Problem,”
Washington Post, May 27, 2012.19 Joe Stephens and Carol D. Leonnig, “Solyndra:
Politics Infused Obama Energy Programs,” Washington Post,
December 25, 2011.20 House Committee on Oversight and Government Reform,
Subcommittee on Regulatory Affairs, Stimulus Oversight, and
Government Spending, hearing on “The Obama Administration’s Green
Energy Gamble,” May 16, 2012.21 James Nelson, Solar3D, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012. Nelson was not against federal funding of basic
energy research, but rather against subsidies to businesses for
commercialization.22 John Woolard, Brightsource Energy, testimony to the
House Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.23 Michael Ahearn, First Solar, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.24 Gregory Kats, Capital E, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.25 James Nelson, Solar3D, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.26 James Nelson, Solar3D, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.27 Dana Milbank and Paul Blustein, “White House Aided
Enron in Dispute,” Washington Post, January 19, 2002.28 Jim Vallette and Daphne Wysham, “Enron’s Pawns,”
Institute for Policy Studies, March 22, 2002, p. 4.29 Timothy P. Carney, The Big Ripoff (New
Jersey: John Wiley and Sons, 2006), p. 209.30 Jeffrey A. Eisenach and Kevin W. Caves, “Evaluating
the Cost-Effectiveness of RUS Broadband Subsidies: Three Case
Studies,” Navigant Economics, April 13, 2011, p. 6.31 Darryl Siry, “In Role as Kingmaker, the Energy
Department Stifles Innovation,” Wired, December 1,
2009.32 Darryl Siry, “In Role as Kingmaker, the Energy
Department Stifles Innovation,” Wired, December 1,
2009.33
www.downsizinggovernment.org/interior/cutting-bureau-reclamation.34 Timothy P. Carney, The Big Ripoff (New
Jersey: John Wiley and Sons, 2006), pp. 4, 111-118.35 www.downsizinggovernment.org/hud/scandals.36 For example, see Bob Hohler, “Trade-Trip Firms Netted
$5.5b in Aid; Donated $2.3m to Democrats,” Boston Globe,
March 30, 1997.37 Bill Miller, “Judge Assails Shredding in Commerce
Case,” Washington Post, December 23, 1998, p. A4. And see
Neil A. Lewis, “After Judge’s Rebuke, Commerce Secretary Widens
Inquiry Into Mishandling of Papers,” New York Times,
January 3, 1999.38 Jim Vallette and Daphne Wysham, “Enron’s Pawns,”
Institute For Policy Studies, March 22, 2002, p. 4. And see Timothy
P. Carney, The Big Ripoff (New Jersey: John Wiley and
Sons, 2006).39 Timothy P. Carney, The Big Ripoff (New
Jersey: John Wiley and Sons, 2006), p. 209.40 Dana Milbank and Paul Blustein, “White House Aided
Enron in Dispute,” Washington Post, January 19, 2002. And
see Timothy P. Carney, The Big Ripoff (New Jersey: John
Wiley and Sons, 2006), pp. 211, 212.41 Dana Milbank and Paul Blustein, “White House Aided
Enron in Dispute,” Washington Post, January 19, 2002. And
see Timothy P. Carney, The Big Ripoff (New Jersey: John
Wiley and Sons, 2006), pp. 211, 212.42 Joe Stephens and Carol D. Leonnig, “Solyndra:
Politics Infused Obama Energy Programs,” Washington Post,
December 25, 2011.43 Joe Stephens and Carol D. Leonnig, “Solyndra Loan:
White House Pressed on Review of Solar Company Now Under
Investigation,” Washington Post, September 13, 2011.44 Carol D. Leonnig and Joe Stephens, “Obama Was Advised
Against Visiting Solyndra after Financial Warnings,” Washington
Post, October 3, 2011.45 Carol D. Leonnig and Joe Stephens, “Federal Funds
Flow to Clean-Energy Firms with Obama Administration Ties,”
Washington Post, February 14, 2012.46 “Greenlighting Solyndra,” Washington Post,
December 22, 2011,
www.washingtonpost.com/wp-srv/special/politics/solyndra-key-players.47 Eric Lipton and John M. Broder, “In Rush to Assist a
Solar Company, U.S. Missed Signs,” New York Times,
September 22, 2011.48 Nathan Rosenberg and L.E. Birdzell, Jr., How the
West Grew Rich (New York: Basic Books, 1986), p. 277.49 See the work of Clayton Christensen,
www.claytonchristensen.com.50 Nathan Rosenberg and L.E. Birdzell, Jr., How the
West Grew Rich (New York: Basic Books, 1986).51 These and other off-base predictions are discussed in
Chris Edwards, “Entrepreneurs Creating the New Economy,” Joint
Economic Committee, November 2000.52 “M&A Century: Same as It Ever Was,” Wall
Street Journal, December 31, 1999.53 Angel investment is currently about $20 billion a
year and venture investment is about $30 billion. See Jeffrey Sohl,
“The Angel Investment Market in 2011,” University of New Hampshire,
Center for Venture Research, April 3, 2112. The venture capital
figure is from the National Venture Capital Association at
www.nvca.org.54 Gregory Kats, Capital E, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.55 Craig Witsoe, Abound Solar, testimony to the House
Committee on Oversight and Government Reform, Subcommittee on
Regulatory Affairs, Stimulus Oversight, and Government Spending,
May 16, 2012.56 Vaudine England, “Shorn of Subsidies, New Zealand
Farmers Thrive,” International Herald Tribune, July 2,
2005.57 www.downsizinggovernment.org/usps.58
www.downsizinggovernment.org/transportation/amtrak/privatize.59 Chris Edwards, “Federal Infrastructure Investment,”
testimony to the Joint Economic Committee, November 16, 2011.60
www.downsizinggovernment.org/transportation/airports-atc.